1. A corporation may alternate between S corporation and C corporation status each year, depending on which results in more tax savings.

a. True

b. False

2. If the IRS reclassifies debt as equity under ? 385, the repayment of the debt by the corporation to the shareholder is treated as a dividend, assuming adequate E & P.

a. True

b. False

3. Dave contributes land (adjusted basis of $30,000; fair market value of $100,000) to Tan, Inc., in exchange for all of its stock. The land is encumbered by a mortgage of $27,000 which Tan assumes. Since the transaction qualifies for nonrecognition treatment under ? 351, Tan?s adjusted basis for the land is $3,000 ($30,000 ? $27,000) and Dave's adjusted basis for the stock is $3,000.

a. True

b. False

4. Amos contributes land with an adjusted basis of $70,000 and a fair market value of $100,000 to White, Inc., an S corporation, in exchange for 50% of the stock of White, Inc. Carol contributes cash of $100,000 for the other 50% of the stock. If White later sells the land for $110,000, $35,000 [$30,000 + 50%($10,000)] is allocated to Amos and $5,000 ($10,000 x 50%) is allocated to Carol.

a. True

b. False

5. To the extent of built-in gain at the time of contribution, partnerships may choose to allocate or not allocate gain on the sale of contributed property to the contributing partner.

a. True

b. False

Answer rating: 100% (QA)

1 A corporation may alternate between S corporation and C corporation status each year depending on which results in more tax savings a True b False A ... View the full answer